As we approach the upcoming general election, many of your clients may be concerned with its impact on the property market. After all, any major political event has the potential to influence the economy and housing market. Other worries that may be on your clients’ minds include the possibility of even stricter lending criteria from high-street lenders, as well processing delays due to increased demand as borrowers try to complete their transactions before 4th July.
Understandably, many borrowers may feel overwhelmed. However, it’s essential to remember that with every problem comes an opportunity for a solution and, as a specialist finance lender, it’s our job to remain informed and equipped to guide your clients through any obstacles they may face during this time. So, let us explore the main concerns and how we have positioned ourselves to offer them the necessary support should they need it.
Pre-election jitters
Rishi Sunak’s decision to call a general election in early July with only six weeks’ notice blindsided many, from seasoned political commentators to his MPs. Since then, one of the main concerns that homeowners and property investors may have is how the general election results will affect the housing market.
While there is always a level of uncertainty surrounding any election, it’s essential to remind your clients that the UK housing market is resilient. Historic data shows that despite political changes, the housing market has remained stable over time. Moreover, it has stayed relatively steady in the wake of Sunak’s announcement, with some minor fluctuations. These included Swap rates initially rising from 4.5% to 4.7%, but eventually settling at 4.6%. Similarly, mortgage rates from major lenders also saw a slight increase, going up from 5% to 5.1%. Although any rate rise may be undesirable for borrowers, these changes are not as significant as the 90-basis point increase observed in September 2022, followed by a drop to around 60 points.
What the experts are saying
The impact of an election on the property market is a hot topic of discussion yet what we have seen so far suggests that as with previous election cycles, any significant upheaval is unlikely. Rightmove’s June House Price Index revealed that the sector has experienced minimal impact from the election, as the number of sales being agreed upon has increased by 6% compared to the previous year. Additionally, there has been a 5% annual rise in buyer demand. This aligns with Savills’ findings in March, where 79% of their surveyed clients stated that their plans to move in the next year would not be affected by the upcoming election.
The most significant factor in the property market in fact, is affordability – the rate and magnitude of interest rate cuts will have a greater effect on the market than the timing or result of the general election. This is especially relevant considering the high probability of a change in government. If interest rates do begin to rise again, then affordability will come back into sharp focus, particularly for buy-to-let borrowers. Being able to meet ICR stress testing is a key concern, especially if it’s set at 145% or 165%. A higher stress test could also mean a borrower needs to raise a bigger deposit, putting further pressure on them.
Furthermore, Rightmove reported that the average time to complete a sale after an offer is accepted is 149 days, up from 119 in 2019. There are multiple reasons for these delays, including lengthy local searches, understaffed conveyancing companies, and a post-pandemic reduction in conveyancers. As a result, there has been a flurry of newer and sometimes less experienced companies that cannot cope with more complex purchases.
Specialist lending solutions
In these uncertain times, it is our priority to ensure that your clients are supported and have access to the financial resources needed for their personal or professional pursuits.
If your client doesn’t want to wait for the election results to come in, a bridging loan could allow them to quickly secure funds for a variety of purposes, including purchasing a property, preventing a chain break, and unlocking equity. Our bridging team understand that time is of the essence in these situations and are dedicated to helping your clients navigate through uncertain times. They ensure our indicative terms are produced within one business hour, and the close relationships we have developed with our third party providers allows us to work together collaboratively to achieve the best possible outcome for your clients, even in adverse situations.
For those cases that qualify, we also offer automated valuation models (AVMs) on residential regulated and unregulated bridging finance applications on properties valued under £750,000 – speeding up the process further.
For your buy-to-let clients who may be concerned with potential affordability changes, our five-year products are stress-tested at 125% across all tax brackets which can also mean that borrowers can often proceed with a smaller deposit.
Another way we have addressed affordability concerns is through including the option of higher fees and lower rates. While some may question the initial cost, this approach will allow for lower monthly payments and can ultimately increase the borrowing capacity for your client. This is especially valuable as many lenders are now implementing stricter stress tests, but products with higher fees and lower rates can help borrowers meet these requirements.
Get in touch
At MT Finance we’re always looking for solutions, not problems. We believe that by providing greater flexibility, we can help alleviate any concerns your valued clients may have.
Our dedicated buy-to-let, regulated bridging and unregulated bridging team are on-hand to talk through a case before submission. You can download all of our product guides here, and if you prefer to speak with someone directly, please fill out this form and we will be in touch with you shortly.